Humans are motivated to interact with each other, but the neural bases of social motivation have been predominantly examined in non‐interactive contexts. Understanding real‐world social motivation is of special importance during middle childhood (ages 8–12), a period when social skills improve, social networks grow, and social brain networks specialize. To assess interactive social motivation, the current study used a novel fMRI paradigm in which children believed they were chatting with a peer. The design targeted two phases of interaction: (1) Initiation, in which children engaged in a social bid via sharing a like or hobby, and (2) Reply, in which children received either an engaged (“Me too”) or non‐engaged (“I'm away”) reply from the peer. On control trials, children were told that their answers were not shared and that they would receive either engaged (“Matched”) or non‐engaged (“Disconnected”) replies from the computer. Results indicated that during Initiation and Reply, key components of reward circuitry (e.g., ventral striatum) were more active for the peer than the computer trials. In addition, during Reply, social cognitive regions were more activated by the peer, and this social cognitive specialization increased with age. Finally, the effect of engagement type on reward circuitry activation was larger for social than non‐social trials, indicating developmental sensitivity to social contingency. These findings demonstrate that both reward and social cognitive brain systems support real‐time social interaction in middle childhood. An interactive approach to understanding social reward has implications for clinical disorders, where social motivation is more affected in real‐world contexts. We investigated social motivation in children aged 8‐12 using a novel fMRI paradigm in which children believed they were chatting online with a peer and with a computer, both of which gave engaged and non‐engaged replies. Brain regions associated with reward processing and social cognition were more active when interacting with the peer versus computer, and this activation changed with age. Reward circuitry was modulated by main effects of social context and engagement as well as their interaction.